Or, don’t count your chickens before they’re hatched.

Anyone who’s been involved in business acquisition talks knows that there are many things that can get in the way of completion. A few weeks ago (Strength in Numbers – Growth by Acquisition) I wrote that our LLP CRM (Customer Relationship Management) division was in acquisition talks with Logic point, hitherto our main competitor in the Czech Republic. And, lest you immediately draw the wrong conclusions, we haven’t stopped talking.

Acquisition involves courtship, engagement, marriage, sometimes even divorce. It takes time, and engagement is no guarantee of marriage. As with human relationships, attraction can sometimes be misplaced, and even if marriage is solemnized, the honeymoon doesn’t always last. And sometimes, even if the match is entirely suitable, circumstances and accident conspire to undermine it.

In our case you might describe the ‘marriage’ as a ‘forced’ one, forced by external events- our competitor’s financial distress. That said, it seemed plausible and sensible that we should help Logic point, and, together, become a larger, stronger company, very likely the dominant player in the Microsoft Dynamics CRM market in the Czech Republic.

Following our first talks we very quickly established the scale of Logic point;s difficulties and the probable extent of the cash investment we would need to make. But most importantly we established that our companies would be able to coalesce without friction, each bringing strong complementary skills to the mix. Acquisition, though, was predicated on our being able jointly to pay off the company’s liabilities over several years. This would mean negotiating reasonable terms for the termination of Logic point’s office lease, and the settlement of other outstanding debts. All of this seemed eminently negotiable. The alternative, it seemed, was bankruptcy, and to avoid such circumstances, we predicted, creditors would be willing to negotiate.

This was optimistic. Creditors, including the tax authorities, called our bluff and refused to negotiate.. Without an immediate injection of substantially more cash than we had planned to invest, the company had no choice but to declare bankruptcy, and enter a period of administration, a state from which it is not easy to emerge.

I can’t see who gains from this. The state may obtain full payment of unpaid taxes to date, but they won’t get any future income, and other creditors will get only a portion of what they’re owed. Moreover, it may take time to appoint an administrator, and in the meantime employees and clients may lose confidence and leave.

We’re still in talks, hoping to collaborate with an administrator, if one is appointed soon enough, hoping even to purchase what remains of the company if that is legally possible, perhaps picking up the pieces if not.